Another Top-10 List — Most (and Least) Expensive Electricity Costs by State

As we turn our air conditioners colder this pre-fourth of July weekend due to the heat wave covering most of the country, the cost of electricity comes front and center. According to the U.S. Energy Information Agency (EIA), air conditioning is the number one user of electricity in the average U.S. home, accounting for 15 percent of all residential electricity consumption. Total U.S. residential electricity consumption for 2017 is shown in the following table. This is the average, so in many states (I live in HOT HUMID Houston, Texas) it is much greater.

1 Includes televisions, set-top boxes, home theater systems, DVD players, and video game consoles.2 Includes desktop and laptop computers, monitors, and networking equipment.3 Does not include water heating.4 Includes small electric devices, heating elements, exterior lights, outdoor grills, pool and spa heaters,backup electricity generators, and motors not listed above. Does not include electric vehicle charging.

Other than people that live off the grid, one commonality we have across the U.S. is the use of electricity. Depending on where one lives, however, can significantly impact the user’s cost of power. As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market or a National Economy. The same is true regarding the cost of electricity and the amount of electricity consumed. Some states are cheap and others expensive.

Electricity costs are a function of cost per kilowatt hour (kWh) times the number of kilowatts used. The average U.S. home uses 897 kWh costing an average $115.62 per month. While some states have expensive electricity, others are much more affordable.

Which states have the most expensive and cheapest residential costs? The following table shows cost per kilowatt hour as of April 2018, April 2017 and the percentage change for the 10 states having the most expensive cost per kilowatt hour. Also included are the percentages by state of Hydro- and Non-Hydro renewable power. Hydro generation of electricity is the cheapest form of electricity, so a greater level of this source of energy should correlate to more affordable electricity.

The 10-states with the cheapest residential electricity costs are shown in the next table.

The source of electricity cost information in the U.S., and other energy related data, metrics and statistics, is the EIA. In the past 12-months, the average cost per kilowatt hour rose in 29 states and declined in 21. Hawaii’s electricity cost (the most expensive state per kWh at 31.21 cents) is three times greater than Washington’s 9.74 cents (the cheapest). Washington also has the single greatest amount of hydro-generated electricity.

Why do electricity costs vary so significantly from one state to the next? Part of this can be explained by the generation source of electricity. Some forms of electricity generation and distribution cost more than others. Each state has a public utility regulatory commission (or similar rate-setting group). Some states have competitive companies selling electricity on the same power lines and others do not. Some states have material peak loading times (such as mid-afternoon in hot climates) that require investment in expensive peak generation capacity.

Which states have the greatest average monthly electricity bill for residences? And the lowest? These are shown in the next two tables.